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Should you invest in real estate?

Should you invest in real estate? Many Canadians look at real estate as an investment tool/income-generating source and one of the safest investments. An excellent real estate investment will build equity based on the appreciation of your property plus provide cash flow from rental income. Although each type of real estate investment involves a certain amount of risk, doing your due diligence proves whether your money will be well spent.

In 2022, the Canadian housing market will continue to boom due to low-interest rates and limited inventory. This boom made residential properties increase in appreciation faster across Canada. Investors can now buy a property with lower mortgage payments while the property increases in value.

How popular is real estate investing in Canada? According to,

  • 551,000 – the number of  residential properties Canadian investors and foreign buyers bought  in 2020 —a new annual record.
  • Average home prices across Canada was up 17.1% since 2019

Before you make the leap, consider your long-range goals, current financial situation, market conditions, type of property, location of the property, type of tenant, and whether you want to be a DIY landlord or outsource to a property manager.

1. Begin with the end in mind. What’s your exit strategy?

What do you want your real estate investment to do for you? I once attended a motivational seminar where the speaker said that most people fail to realize their goals because they set vague goals. Set specific, realistic goals, within a reasonable time frame, then work backward. Rather than saying – I want to own millions of dollars of investments, reframe to I want to own two single-family residences, each worth $500,000, that make at least $1500 per month cash flow within four years.

Or take real estate investing for a test drive by renting out spare rooms in your primary residence or renting a suite in your primary residence. It’s a great way to start your real estate journey.

Would you like some help figuring out your investment goals? Take my masterclass – Do you want to be a landlord. Feb 11th at 11:00 MST.  To attend this event, click here 15 minutes before the event time:

2. Find a mentor/experienced real estate investor

The great thing about real estate investing is that many others have gone before you and been very successful. You can shorten your learning curve by taking courses or joining a real estate investment group where you can learn from experienced investors. Be careful that if you want to buy Canadian property, the course or investor group is Canadian. Laws are very different between countries and even provinces. What works and is legal in the USA will probably not work in Canada and vice versa.

3. Run the numbers

Since most real estate investing involves a long-term commitment, it’s always a good idea to look at the past 10, 20, 30 years of real estate cycles. Check historical data, economic trends, the real estate cycles, and check-in with real estate professionals for information on the housing market in the area where you’d like to invest.

4. Know your niche of renter

We all have certain types of people we like. Who do you want to rent to? Single professionals in the downtown core? Working-class families in suburbia? University students in the university area? Travelers for short-term vacation rentals?  Typically, one niche will resonate more for you than the others.

5. Choose the right location

Canada offers many options for real estate investments throughout Canada. To see which area meets your criteria, run a market analysis. A market analysis provides detailed information about the economy, employment, environment, future development conditions, proximity to universities,  colleges, schools, main arteries, and amenities.

6. What type of property do you want to manage?

Everyone needs a place to live – housing will never go out of style. Residential rental properties come in every shape, size, style, and price range and are more affordable than commercial real estate.

Which type of property are you most comfortable managing? Single-family dwellings are a great real estate investment that attracts families who want to stay put. Student residences, short-term or vacation properties, offer excellent income, need to be centrally located or situated in a desirable neighbourhood, and require a well-oiled maintenance team to keep the operation running smoothly. Condominiums offer excellent entry-level pricing and attract singles, couples, and those who enjoy the convenience of having work and amenities within walking distance but may have higher turnover rates.

Do you want to build a new property or remodel an existing property for a rental investment?

If so, you may qualify for the New Residential Rental Property Rebate (NRRP Rebate).

Regardless of the type of property, does it have appreciation potential? Is it in an up-and-coming neighbourhood? Will the area hold its value because of its location?  Does it need a lot of renovating? What future developments are in place?

7. How will you pay for it?

Do you have savings? An inheritance? Can you borrow from your home equity? Will you be withdrawing money from your RRSP or TFSA? Are you planning to find a vendor-take-back mortgage; where the seller who owns the property lends the money to a buyer to purchase it?

For traditional bank loans, you can borrow up to 80% of your home equity at rates as low as 1.5%, which allows you to invest in real estate easier. A home equity loan is also tax-deductible and can reduce your income tax. Overall, a home equity loan is a great way to use your assets to expand your financial portfolio. However, bear in mind loan rates are higher for rental properties than they are for principal residences.

If you’re following the traditional route of applying for a mortgage through a bank – it is good to educate yourself about how the banks make their decisions.

8. Will it cash flow?

Will you still be able to cover all your expenses every month (loan, interest, taxes) and still cash flow? Don’t fall in love with a property, neighbourhood, or price until you’ve crunched your numbers. If it cash flows, it’s a good investment if it doesn’t walk away.

9. Get support

With anything new, there’s a learning curve that can be shortened by taking training, and joining investing and landlording groups such as Real Estate Investment Resource Network, Ontario Landlords Watch, and Canadian Landlords Association.

Would you like to receive articles, tips, and events? My news blast will help!

10. Do you want to be a landlord?

Lastly, do you want to be a passive investor who outsources to a property manager or a DIY landlord? Whether you decide to self-manage or hire a property manager – every province has rules for landlords and tenants, and as a real estate investor, you will need to learn and apply them.

There are numerous reasonably priced courses you can take to fast-track your landlording knowledge while keeping you on the right side of the law. Understand that learning takes time and is a commitment on many levels. Even if you decide to outsource to a property manager, you need to know the rules to know that your property is well managed and assess whether you believe it’s worth the cost/reduction in your profit margin.

Would you like some help figuring out your investment goas? Take my masterclass – Do you want to be a landlord. Feb 11th at 11:00 MST,  To attend this event, click here 15 minutes before the event time:

Back to my original question  – should you invest in real estate? That depends on how you answered the first question and all the others. If you decide to invest in real estate, whatever route you choose to take, where there’s a will, there’s a way. Determined investors find ways to buy real estate rentals regardless of their income or savings.

Why did you decide to invest in real estate rentals? I’d love to hear about it; [email protected]

To take advantage of helpful tips, tools, and educational resources for DIY landlords, sign up for a membership for Landlord Fundamentals 101. To save even more time and money, combine Landlord Fundamentals 101 with one-on-one coaching to qualify for the Canada Alberta Job Grant.

Would you like to receive articles, tips, and events? My news blast will help!

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